Meet the new Comcast-NBCU: Content meets conduit everywhere; Will it work?

Meet the new Comcast-NBCU: Content meets conduit everywhere; Will it work?

Summary: Comcast said officially acquired a controlling stake in NBC Universal in a deal valued at $30 billion. Comcast will have an arsenal of cable channels, a huge distribution network, a movie studio and a top 10 Web presence with 82 million monthly unique visitors. Now the hard part: Leveraging these assets.

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Comcast said Thursday that it has officially acquired a controlling stake in NBC Universal in a deal valued at $30 billion. Comcast will have an arsenal of cable channels, a huge distribution network, a movie studio and a top 10 Web presence with 82 million monthly unique visitors. Now the hard part: Leveraging these assets.

But as Comcast CEO Brian Roberts said on a conference call (statement, Techmeme, presentation): "There's more upside than downside buying it today." In the end, Roberts got a good deal, "buying at low point in cyclical changes," and had a willing seller in General Electric. "It's a reasonable risk and that's how you get excess returns," added Roberts.

First the details:

  • Comcast will own 51 percent of NBCU in a joint venture with GE holding the rest.
  • NBCU deal valued at $30 billion. Comcast will contribute properties valued at $7.25 billion and pay GE $6.5 billion in cash.
  • Jeff Zucker, NBCU's head honcho, will run the venture, based in New York.
  • NBCU will have a bevy of cable channels such as USA, Bravo, CNBC and Versus. These properties will have two revenue streams, cable affiliate fees and online revenue. Cable still drives most of the joint company's revenue and earnings.
  • Roberts talked the financials and gave Wall Street a lot of goodies to allay any worries. Biggest perk: Comcast raised its dividend. And the deal is immediately accretive to earnings.

  • Comcast will be able to tap multiple demographics and can chase interactive television and powerhouse content such as Olympics coverage. Executives talked about launching new properties and creating video on demand bundles.

Now the big questions: Will this deal work when history is littered with botched media mergers and attempts at vertical integration? Will there be culture clashes? Will regulators approve? And what's the big overriding strategy online and offline?

The short answers:

  • If anyone can make a media merger work it's Roberts, who has a lot of experience with large acquisitions and isn't ego driven. He's a good business man who will let NBCU operate as its own. Comcast executives said this deal is more like Time Warner buying Turner than Time Warner buying AOL. Roberts said the deal was good standing on its own without any synergy assumptions. How many media executives have you heard break out terms like IRR (internal rate of return)?
  • Culture clashes? NBCU employees will be stoked to go to Comcast relative to GE. There's a better match with working with a company that has cable pipes and content than one that make airplane engines and wind turbines. "I think we're going to merge quite well," said Roberts. Here's the team:

  • As for the regulatory issues, the Comcast-NBCU deal doesn't rewrite the TV industry. The deal will get scrutiny, but everyone I've asked thinks regulators will approve. "We believe this is an approvable transaction," said Roberts.
  • The cable strategy is the same as it always is for Comcast. Grow margins. With NBCU's library and channels Comcast won't have to negotiate with all of these properties. There's a lot of savings there. Comcast is also likely to bundle these content assets for TV Everywhere. Distribution helps content. The company talked a lot about new distribution models. "We're big believers in trying new things," said Stephen Burke, chief operating officer.

Later in the conference call there was an interesting exchange about TV Everywhere and Hulu. "Right now NBCU is distributing its free broadcast content on Hulu, but has been careful about putting cable content out there," said Burke, who added that the move made sense. "Cable content would go out to TV Everywhere. Hulu and TV Everywhere are complimentary," said Burke. An executive also noted that Hulu premium wasn't in the cards.

What Comcast will do with properties ranging from Univision to NBC Sports to Hulu remains to be seen. But the giant has a huge arsenal of assets at its disposal for online and cable use. Comcast can compete directly with ESPN with Versus, NBC Sports and regional assets, it can be an interactive TV player and do just about anything. Executives also talked up wireless broadband via its partnership with Clearwire. As with all mergers on the day the deal is announced the sky's the limit. Now Comcast and NBCU just have to deliver.

Topics: Mobility, Banking, CXO, Enterprise Software, Hardware, Networking, Telcos

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  • This will work when Comcast starts gouging other carriers

    As soon as Comcast starts raising the prices that their competitors have to pay this will be a goldmine! Imagine the negotiations between Comcast and DirectTV and/or Dish Network for carriage of the "Comcast channels". I can see Comcast raising the prices to extortion levels soon.

    Consumers will lose, and lose BIG.

    Now that Comcast is both a content provider and a pipe-line for that content we will see price gouging wherever possible.

    Your cable bill WILL go up. Even if you are not a Comcast subscriber. Satellite TV will be held hostage to the ransom demands of Comcast. And there will NEVER be any ability to stream video over the internet in any form that competes with the "Cable TV" delivery system.

    We lose, Comcast wins. All your content are belong to us.

    sismoc
    • It's already happened...

      DirecTV dropped Versus earlier this earlier this fall because Comcast wanted too much money from them...
      Mark D. Peterson
    • Why wouldn't they

      Comcast already overcharges for their services.
      They have a history of trying to block there competitors services on the Internet.

      This can only be bad.

      I've been waiting and watching for someone to host the TV lineup via the Internet so I can call them and cancel my service. They charge twice what I'm willing to pay and every two or three months it goes up again.
      ICUR12
      • Why Wouldn't they

        The big battle will come when Comcast tries to wrest control of ZDNET away from CBS. Networks and Internet do not play well with others.
        El Condor
  • Now if only they could reliably deliver bits at a decent speed.

    Seriously, they can't find money to improve their network, but they can come up with $30B to buy content that their network already has a hard time delivering?

    Not to mention the new and wonderful caps that they put on how much you can download. Sure, you don't get charged for stuff that is on the TV side. But more and more people don't even bother to watch cable when they can just watch streaming video over the Internet.
    Letophoro
    • Never mind the bits

      How about providing HD channels that don't pixellate, freeze and stutter any time there's any action on the screen. Done with this company - going Verizon FIOS. May have to pay more, but its worth it just to not give these guys any more money.

      "The views expressed here are mine and do not reflect the official opinion of my employer or the organization through which the Internet was accessed."

      gnesterenko
      • Actually....

        --> "...going Verizon FIOS. May have to pay more, but its worth it just to not give these guys any more money."

        Even if you go to Version FIOS, you're going to be paying these guys because they will up the rates for Verizon to re-broadcast the content that Comcast will own and that rate increase will be passed on to you as the subscriber. So seriously, unless you unplug your TV from any provider and stick strictly with OTA content, Comcast is going to get money from you, one way or the other.
        PollyProteus
        • Well that's probably what I'm going to do

          [i]So seriously, unless you unplug your TV from any provider and stick strictly with OTA content, Comcast is going to get money from you, one way or the other.[/i]

          I'd be a good excuse to get away from the boob tube anyway, but Americans are so addicted to junk, I doubt they'd have the willpower to break themselves away.

          And cable monopolies know this...
          Wintel BSOD
        • GE's Fault, too??

          Seems like GE doesn't give a rip about the consumer, too. Else, they would have found a more worthy buyer (not likely -- they're very happy to unload NBC/Universal in their current financial situation).
          Fyrewerx
  • RE: Meet the new Comcast-NBCU: Content meets conduit everywhere; Will it wo

    This transaction has got to be stopped. Having this much
    high-value content held hostage by the owner of one set of
    pipes is a trust of the worst order.
    qnetter
    • High-value content? Hardly...

      NBCU's only shining star is Universal HD. All of
      their other networks have been tanking for years.
      Now, that doesn't mean that Comcast isn't going to
      screw people six ways to Sunday, but let's be
      realistic on what the programming actually is.
      jedidethfreak
  • butcher and sell pieces

    I expect more of a butcher and sell pieces from the deal. Just like they did with the radio stations they controlled in Arizona - fired their top talent that drew people to the stations, all for the mighty short term dollar.
    Silent Observer
  • I am sure it will work - for Comcast!

    How about for consumers though? In the early 20th Century, law makers found that companies who controlled the supply chain controlled prices - to the detriment of consumers.

    In the 1970s, the law came to include owners or communications outlets. If you owned all of the news outlets in a community, you controlled information access so only your opnions were heard. That simply was not permitted.

    All that legislation has fallen by the wayside in recent years.

    In many of the communities that they serve, Comcast is the defacto news & entertainment monopoly. This deal only serves to expand that monopoly.

    Would we acquiece so quickly if it was FOX buying NBC-Universal? How about the Chinese government?
    M Wagner
  • RE: Meet the new Comcast-NBCU: Content meets conduit everywhere; Will it work?

    Now that's Comcastic! Good for Comcast in becoming the biggest cable giant out there. After losing a big chunk of their subscriber base, they decided that acquiring a big TV network would force more to subscribe to cable. I personally saw a huge (30% or so) decrease in cable subscribers last December in our town when we cut the cable. When people don't have jobs, they don't watch cable tv because they can't pay the price.

    I wonder now if they will stop over-the-air broadcasts of all NBC affiliates? Talk about a huge monoply! Did they buy out the FCC too? I always thought that over-the-air reception would remain free. Now Comcast could shut that down too.

    All sorts of money-making (?) possibilities for Comcast. (If anyone can afford the bi-annual cable price increase!)
    eddiej23
    • RE: Meet the new Comcast-NBCU: Content meets conduit everywhere; Will it wo

      Yeah, the FCC is totally corrupt and bought out, either by the Cable Moguls or the Telcos. They are seriously considering the abolition of free broadcast TV in order to re-allocate more spectrum to wireless, and exclusive transmission of content via cable.

      Predatory-prey "Free" Market Capitalism at its finest.
      podstolom
      • The FCC cannot do that without Congress ...

        ... dramatically altering the Communication Act of 1934, which declared the airwaves public.

        Scrambling content from privately-owned satellites is quite different than closing down (or scrambling) OTA broadcasts over the public airwaves.

        Most people still watch ABC, CBS, & NBC more than they do their subscription channels.

        These folks purchase basic cable to get good reception in fringe areas (and to support analog TV).

        Premium services give them the cable channels.

        We need not worry about OTA. It's the cost of premium content that we have to worry about...

        For instance ...

        Will Comcast raise the price of NBC cable channels to competitor cable outlets?

        Will Comcast do the same for Universal-produced TV shows and movies?
        M Wagner
    • I don't think they can

      [i]I always thought that over-the-air reception would remain free. Now Comcast could shut that down too[/i]

      That's not NBC, that's thier afiliates, the local stations. Here in the Philadelphia area two local stations swapped affiliates (NBC/CBS) years ago.

      And alot of people still watch TV over the air. If Comcast where to drop their NBC affiliates to go "cable only", they would lose a very large chuck of advertising revenue.
      John Zern
    • Free OTA broadcasting will not come to an end

      Congress is not likely to repeal the cornerstone of the Communcations Act of 1934 (declaring the airwaves public) so we won't likely see OTA broadcasting come to an end.

      After all, Comcast would have nothing to offer its "basic cable" subscribers if there were no OTA signals to tap.

      Now that all OTA is digital, many many communities get no OTA signal at all without basic cable (which has to support analog TVs for some time to come as well as provide OTA digital signals). In those communities where OTA reception is non-existant, cable subscribers might downgrade to BASIC service but they won't stop buying cable.

      The problem is that cable is a de facto monopoly in most markets because (1) satellite-based Internet access is not mature or reliable (due to latency issues), and (2) fibre build-out is so far behind that DSL-based access to TV/Internet is just not widely available.

      Add to that Comcast's less than stellar reputation and it all spells trouble.
      M Wagner
  • Time Warner buying AOL?

    How quickly we forget. AOL bought Time Warner. Forget it at your peril.
    steve.ro
    • Same problem (nt)

      .
      M Wagner